With joblessness spiking to 12-year highs and tax revenues from employers falling, the fund is expected to run a $2.9 billion deficit by the end of 2009. California Gov. Arnold Schwarzenegger says he's added the topic to next week's special session of the Legislature called to address the state's deteriorating financial condition, the Los Angeles Times reported Saturday.

Payments to those unemployed won't be affected by fund deficits, since they are guaranteed by federal law. But California would have to borrow to make the payments, thus adding to the burden on interest payments it is making.

"Our current economic slowdown has led to unemployment rates in California much higher than economists had predicted," Schwarzenegger told the Times, "and that has put an additional strain on our unemployment insurance system."

The unemployment fund has been added to Schwarzenegger's agenda for the session -- a post-election, lame-duck meeting to deal with California's $10 billion plus budget deficit, home foreclosures and growing unemployment, the newspaper said.